Term
| Sarbanes-Oxley Act of 2002 |
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Definition
| Rules that apply to publicly held companies that emphasize internal controls through safeguarding assets, processing accurate information, and insuring compliance with laws. |
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Term
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Definition
| Attitudes of management and employees towards the importance of controls including philosophy and operating styles, organizational structure, and personnell policy. |
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Term
| Control Procedures and Examples |
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Definition
| Assurance that the business goals will be achived without fraud. Examples: Hiring competent employees, rotating duties, mandatory vacation; delegating and seperating resonsibility; proofs and security procedures; seperating custody of assets and accounting. |
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Term
| Cash Short and Over Account |
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Definition
| Errors that salespeople make in making change or ringing up sales. Debit balance is closed in Misc. Exp.; Credit balance is included in other income on the income statement. |
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Term
| Cash Register Controls 8 Steps |
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Definition
| 1. Each shift starts with a change fund. 2.Cash register displays amount for customer verification. 3.Customer gets a reciept. 4.Clerk and supervisor count the money, which equals change fund plus cash sales. 5.Cash is taken to the safe. 6.Reciepts taken to accounting department where sales are totaled for journal entries. 7.Cash is deposited to bank. 8.Bank makes duplicate deposit slip for accounting verification. |
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Term
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Definition
| Analysis of items that make cash account different from the amount on the bank statement. 2 sections: Bank and Company with adjusted balances that should match. |
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Term
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Definition
| Small cash amounts for minor expenses given to the petty cash custodian who replenishes it at periodic intervals. The accounts affected by petty cash disbursements are debeted when the account is replenished. |
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Term
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Definition
| Banks require you to have a minimum cash balance in account as part of loan agreements and lines of credits. |
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Term
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Definition
| The shareholders elect a board of directors who hire upper management. There is also an auditing committee which is made up of people who aren't employees or the legal council of the company. |
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Term
| COSO Model of Internal Control |
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Definition
| 1. Control Environment. 2. Risk Assessment. 3. Control Activities. 4. Info and communication. 5. Monitoring. |
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Term
| Construction in Progress Account |
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Definition
| Direct costs incurred during building includign labor and materials. The account's normal balance is a debit; when construction is complete, the account is credited to Building account. |
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Term
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Definition
| Costs that benefit only the current period |
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Term
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Definition
| Costs that extend an asset's useful life. |
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Term
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Definition
| Contract for use of an asset for a period of time. |
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Term
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Definition
| Accounted for as if Leassee has bought the Asset and is written off as an expense over the life of the lease. |
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Term
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Definition
| Accounted for as if leassee is renting the asset. Debit rent expense and credit cash. |
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Term
| Straight Line Depreciation Method |
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Definition
| Annual Depreciation= (cost-residual value)/useful life. |
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Term
| Unit of production Depreciation Method |
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Definition
| Depreciation per unit= (cost-residual value)/total units of production. Depreciation=Depreciation per unit X Total units of Production used. |
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Term
| Double Declining Balance Depreciation |
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Definition
| 1. Find straight line percentage using the expected useful life. 2. Double that percentage. 3.Compute depreciation by mulstiplying the rate times the current value of the asset. *Estimated residual value is not computed, but asset shouldn't be depreciated beyond residual value. |
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Term
| Fixed Asset Turnover Ratio |
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Definition
| FATR= Revenue/Avg Book value of Fixed assets |
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Term
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Definition
| Includes purchase price plus closing costs, landscaping, cost of torn down buildings less proceeds from sold scrap. |
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Term
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Definition
| 1.Update Depreciation Expense and Accum Dep to date of disposal. 2. Cred the asset for original cost. 3.Remove Accum Dep. 4.Update Cash paid or recieved. 5.Record either a gain (credit) or loss (debit) on disposal. |
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Term
| Direct Write-off of Bad Debts |
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Definition
| Records Bad Debt Expense only when account is determined to be worthless. |
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Term
| Allowance Method for Writing Off Bad Debt |
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Definition
| Estimates uncollectible accounts at the end of the accounting period. |
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Term
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Definition
| A stronger legal claim than an account recievable; the company recieves interest on credit terms. |
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